Claiming Section 87A Rebate in ITR Filing & Avoiding Missed Deductions
- Asharam Swain
- Jun 2
- 8 min read
Claiming the Section 87A rebate in your Income Tax Return (ITR) can significantly reduce your tax liability, making it an important provision for individuals with taxable incomes of ₹5,00,000 or less. However, missing deductions or making errors during the filing process can lead to notices from the Income Tax Department, which could complicate your filing. Let us explore the process of claiming Section 87A rebate, tips on avoiding missed deductions, and offer insights into how to ensure a hassle-free ITR filing experience, with the help of platforms like TaxBuddy.
Table of Contents
What is Section 87A Rebate?
Section 87A of the Income Tax Act provides a rebate to individual taxpayers who fall within the income limits specified by the government. This rebate reduces the tax payable by eligible taxpayers, thus providing significant tax relief. It applies to those who have a total taxable income of ₹5,00,000 or less in the financial year. The rebate amount is ₹12,500 or 100% of the total tax payable, whichever is lower. The benefit is available under both the old and new tax regimes, making it a useful tool for reducing tax liability.
Eligibility Criteria for Claiming Section 87A Rebate
To claim the Section 87A rebate, an individual must meet the following criteria:
Income Limit: The total taxable income must not exceed ₹5,00,000 in the financial year.
Rebate Amount: The maximum rebate you can claim is ₹12,500, which reduces the overall tax payable.
Residency Status: Only residents of India can claim this rebate, making non-residents ineligible.
Taxable Income Calculation: The rebate is calculated based on the final taxable income after all deductions under Sections 80C, 80D, and other applicable sections. If the total taxable income remains under ₹5,00,000 after all deductions, you are eligible for this rebate.
How to Claim Section 87A Rebate in Your ITR
Claiming the Section 87A rebate in your ITR is a straightforward process. Follow these steps:
File Your ITR: Begin by filing your ITR using the applicable ITR form based on your income sources.
Accurate Income Reporting: Ensure all income is correctly reported, including salary, business income, and any other sources of income.
Deductions: Before applying for the rebate, claim all eligible deductions under Sections 80C, 80D, and others to reduce your taxable income.
Rebate Section: If your taxable income is ₹5,00,000 or less, you can enter the rebate amount (up to ₹12,500) in the designated section of the ITR form.
Verify and Submit: After entering the rebate, verify all the details, submit the ITR, and ensure that your Form 26AS matches your filing for accurate processing.
Common Mistakes to Avoid When Claiming Section 87A Rebate
To maximize the benefits of Section 87A and avoid errors, be cautious of the following common mistakes:
Incorrect Income Calculation: Make sure all sources of income, including freelance income, capital gains, and interest, are accurately included to avoid incorrect taxable income.
Failure to Claim All Deductions: Ensure that deductions under Section 80C, 80D, etc., are claimed before applying for the Section 87A rebate. Overlooking these deductions can lead to discrepancies in your rebate claim.
Filing under the Wrong Regime: Be mindful of whether you are filing under the old or new tax regime, as Section 87A is applicable in both but might affect your overall tax calculation differently.
Not Verifying Form 26AS: Ensure that your Form 26AS, which shows the tax credits received, matches the details provided in your ITR to avoid mismatches that could lead to a tax notice.
Impact of Missed Deductions and Tax Notices
Missing deductions in your ITR filing can lead to unnecessary tax liabilities and tax notices from the Income Tax Department. If the department identifies discrepancies, such as missed deductions or incorrect claims, you might receive a Section 142(1) notice, requesting clarifications or additional documents. These notices often arise from mistakes in reporting eligible deductions, which can increase your taxable income and subsequently your tax liability. Ignoring such notices or failing to correct the errors can lead to penalties and interest charges under Sections 234B and 234C.
How to Rectify Missed Deductions in Your ITR
If you realize that you missed claiming deductions or made an error in your ITR filing, you can rectify the mistake by following these steps:
Revise Your Return: If the original return was filed incorrectly, submit a revised ITR under Section 139(5) of the Income Tax Act. This allows you to correct any discrepancies, including missed deductions.
Respond to Tax Notices: If you receive a Section 142(1) notice for missed deductions, respond promptly by providing the necessary documents or explanations.
Accurate Documentation: Ensure you have all supporting documents for the deductions you claim, including receipts, bills, and proof of investments.
Use Tax Tools: Platforms like TaxBuddy offer automated checks to help identify missed deductions and ensure accuracy, helping to avoid such errors in the future.
How TaxBuddy Helps in Claiming Section 87A Rebate and Avoiding Missed Deductions
TaxBuddy offers a comprehensive solution to claim the Section 87A rebate and avoid missed deductions:
Automatic Calculation: TaxBuddy calculates your eligible rebate and deductions based on your income and investment details, ensuring you claim the maximum benefit.
Document Support: The platform allows you to upload and organize your tax documents, making it easy to track and verify deductions.
Real-Time Alerts: TaxBuddy sends timely reminders and alerts to help you stay on top of deadlines and avoid missing any deductions or rebates.
Expert Assistance: TaxBuddy provides access to tax experts who can guide you through any complex situations, ensuring you respond correctly to any notices.
Conclusion
Claiming the Section 87A rebate is an excellent way to reduce your tax burden, but it's important to file your ITR accurately to avoid missing deductions. By double-checking your income and deductions, filing on time, and using tools like TaxBuddy, you can streamline the process and avoid receiving tax notices. For anyone looking for assistance in tax filing, it is highly recommended to download the TaxBuddy mobile app for a simplified, secure, and hassle-free experience.
FAQs
Q1. Does TaxBuddy offer both self-filing and expert-assisted plans for ITR filing, or only expert-assisted options?
Yes, TaxBuddy offers both self-filing and expert-assisted options. The self-filing plan allows you to file your ITR independently using the platform’s user-friendly interface, while the expert-assisted plan provides guidance from tax professionals to help you with complex tax filings, ensuring that all deductions and rebates are correctly claimed.
Q2. Which is the best site to file ITR?
The best site to file your ITR depends on your individual needs. For individuals looking for a straightforward filing experience, TaxBuddy offers a seamless platform with automated tax calculations, reminders, and expert support. It also integrates well with government portals for easy filing. Other options like the official Income Tax Department’s e-filing portal can be used, but they might not provide the same level of assistance and ease of use as TaxBuddy.
Q3. Where to file an income tax return?
You can file your income tax return on the Income Tax Department’s official e-filing portal or through third-party platforms like TaxBuddy. The e-filing portal allows you to directly file your return and track its status. TaxBuddy, on the other hand, simplifies the process by offering automated assistance, ensuring you don’t miss any deductions or rebates, and providing expert support when needed.
Q4. Can I claim Section 87A rebate if my income exceeds ₹5,00,000?
No, Section 87A rebate is only available to individuals whose taxable income is ₹5,00,000 or less. If your income exceeds this limit, you are ineligible for the rebate. However, you can still reduce your tax liability by claiming other eligible deductions like those under Sections 80C, 80D, and others.
Q5. How can I rectify a missed deduction after filing my ITR?
If you realize that you missed a deduction after filing your ITR, you can rectify the mistake by filing a revised return under Section 139(5) of the Income Tax Act. The revised return should be filed before the end of the relevant assessment year or before receiving any notices from the Income Tax Department. Ensure you have proper documentation to support the deductions you're claiming.
Q6. What happens if I miss the Section 87A rebate claim in my ITR?
If you miss claiming the Section 87A rebate in your ITR, you may end up paying more tax than required. However, you can rectify this by filing a revised return before the assessment is finalized. It’s important to do this as soon as possible to ensure you get the rebate and avoid any penalties for underpayment.
Q7. How can TaxBuddy assist in claiming the Section 87A rebate?
TaxBuddy helps you claim the Section 87A rebate by automatically calculating your eligibility based on your reported income. It provides step-by-step guidance throughout the filing process, ensuring that you don’t miss the rebate if you're eligible. Additionally, it offers expert assistance in case you need help with complex tax situations or have questions regarding your rebate eligibility.
Q8. Can I claim the Section 87A rebate under the new tax regime?
Yes, the Section 87A rebate is available under the new tax regime as well. The rebate applies to taxpayers whose total taxable income is ₹5,00,000 or less, regardless of whether they choose the old or new tax regime. It’s important to note that the new tax regime does not allow deductions under various sections like 80C, 80D, etc., but the Section 87A rebate can still be claimed if you qualify.
Q9. Are there any penalties for missing deductions in ITR filing?
Yes, failing to claim deductions properly in your ITR can lead to penalties. The Income Tax Department may issue a tax notice under Section 142(1) or Section 143(1) if it identifies any discrepancies or missing deductions. This can result in additional tax liability, interest, and penalties. To avoid this, it is important to ensure all eligible deductions are claimed before submitting your return.
Q10. What is the impact of not responding to a tax notice for missed deductions?
If you do not respond to a tax notice for missed deductions, the Income Tax Department may make an assessment based on available information, leading to higher tax liability. Ignoring the notice may also result in penalties and interest charges. Therefore, it is crucial to address any tax notices promptly by providing the necessary documentation and rectifying the errors in your return.
Q11. Can I use TaxBuddy to handle tax notices and missed deductions?
Yes, TaxBuddy can help you handle tax notices related to missed deductions. The platform offers expert support to guide you through the process of responding to notices, ensuring that you provide the correct information and avoid penalties. Additionally, TaxBuddy helps you review your ITR and ensures that all deductions are properly claimed, reducing the likelihood of receiving tax notices in the first place.
Q12. Is it possible to file a revised ITR after receiving a Section 142(1) notice?
Yes, it is possible to file a revised ITR after receiving a Section 142(1) notice, provided you do so before the end of the assessment year. Filing a revised return allows you to correct any discrepancies or missed deductions, ensuring that your tax liability is accurately reported. It’s advisable to respond to the notice promptly and file the revised return as soon as possible to minimize penalties.
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